Homeowners must pay Peoria $800,000 in water fight

by Sonu Munshi - Dec. 16, 2010 12:00 AMArizona Business Gazette

Desert Harbor Homeowners Association lost an appeal last month that contested the water rate Peoria charged to fill its 46-acre lake and some common-area landscaping in the subdivision near 91st Avenue and Thunderbird Road.

"Obviously, the city is pleased with the outcome of these hearings," City Manager Carl Swenson said in a written statement.

Bud Levey, the Desert Harbor Homeowners Association president, declined comment. Steve Burg, Peoria's chief assistant city attorney, said there was no further administrative-appeal option, so if the association were to continue to fight the case, it would go to court. Already the city has spent nearly $80,000 on the Desert Harbor appeal, Burg said.

Desert Harbor stopped paying the city for water in 2008 because of what it considered to be higher charges than what had been agreed upon. The association's annual water bill, under current rates, is $330,000.

For more than two years, the parties have gone back and forth on the issue, including whether the association has continued rights to a well, which the association feels gives it greater rights than the average customer.

Levey had told The Republic last January that the HOA has a grandfathered water right for use of the well in a well-transfer agreement that does not expire.

"We are not a typical customer, and the city is looking at us from the standpoint that we are," Levey had said.

The well has been unused for years. The city supplies water from its Greenway Water Treatment Plant.

In his ruling, Merkow stated that "no legal basis exists to support Desert Harbor's claim of entitlement to a special, lower water rate for its lake water meter on or after Jan. 1, 2008."

The city's original 25-year agreement with the developer dates back to 1982, which is when the developer deeded an existing well to the city. In return, the city provided water to the community at a reduced rate.

An amendment to the agreement in 1994 stated that the association had 8 percent ownership interest in the well. At the time, the association paid 30 cents per 1,000 gallons. The rate was later hiked to 32 cents.

According to another amendment in 2005, the hearing officer said the special rates expired at the end of 2007. Thereafter, the city would bill the association at the regular water rate of $3.10 per 1,000 gallons - nearly 10 times what the association had been paying.

Burg hasn't ruled out renewed talks with the association.

"We're still digesting the ruling but we're not totally opposed to bringing them to the table again," Burg said.

Peoria Mayor Bob Barrett, who lives in the community, and because of that has recused himself from official discussions, said the association was "not smart" to reject a prior city offer that would have knocked down money owed and settled on a lower rate charge of $1.29 per 1,000 gallons.

Barrett said the association would do well to not fight the case any longer.

"To continue to fight this by going into Superior Court will only run up attorney's fees for the HOA," Barrett said.